How to Use Alternative Lending When a Bank Has Denied You

When you need funding to keep a small business running smoothly, or to achieve growth, your first thought might be to apply for a loan from a bank. Unfortunately, the number of approvals granted by banks these days has decreased dramatically in the wake of the 2008 recession. Alternative lenders have stepped in to fill the gap in financing however, and you can often secure the funding you need for your small business by working with a reputable alternative lender.

Here are some other ways you can obtain financing for your small business through alternative lending.

Invoice factoring

Invoice factoring is one of the most popular methods of securing funding for small businesses after being denied approval by a bank. In factoring, you would sell some or all of your company’s invoices each month to a factoring company, which will pay you an upfront amount of cash equal to about 80% of the face value of those invoices. Once the factoring company collects the invoice amounts from your customers, the remaining 20% would be remitted to your business, after the factor subtracts out their fee for providing the service.

Merchant cash advances

Merchant cash advances work well for those types of businesses which have a high volume of credit card sales, and they are a common financial product available through alternative lending. In effect, a lender will provide you with an amount of upfront cash in exchange for some percentage of your future credit card sales.

The beauty of this type of arrangement is that you’re not locked into a fixed amount which you must repay each month. Instead, the amount you repay to the alternative lender fluctuates right along with your credit card sales. That means when you’re having a down month or two, less money will be repaid to the lender, and when you have an upsurge in sales, more money would be deducted. This goes on until the upfront amount of cash has been repaid.

Have you been disapproved for a bank loan?

Most small business owners have been denied approval for a bank loan at least once, if not several times. At Mossberg Strategic Capital, we don’t have the same stringent requirements for approval as banks do, so contact us to secure the financing you need for your small business.